Accruals quality and the regulation of funding in UK Universities

This paper contributes to the growing literature on accruals quality in not-for-profit and public sector entities by investigating the variation in accruals in response to funding incentives in UK Universities. We find evidence firstly, that English Universities, consistent with prior research, report small surpluses close to zero; secondly, that discretionary accruals are income increasing/decreasing when pre-managed performance is less/greater than zero and thirdly, that discretionary accruals decrease with the proportion of income sourced from the Higher Education Funding Council, which makes annual funding awards to Universities subject to stringent monitoring and audit requirements.